The Law on Investment 2020 of Vietnam, effective from January 1, 2021, has more investment incentives than the 2014 version. These changes are made to attract more foreign investment into Vietnam and create “uniformity” in investment incentives in legal documents.
More sectors entitled to investment incentives
Regarding sectors entitled to investment incentives, Article 16 of the Law on Investment 2020 has added the following industries to the list. This includes:
- Manufacture of products derived from scientific and technological results in accordance with the Law on Science and Technology;
- Manufacture of products on the list of supporting industrial products prioritized for development;
- Higher education;
- Production of medical equipment;
- Production of goods, and provision of services creating high value or participating in industry value chains.
Forms of and subjects entitled to investment incentives
Article 15 of the Law on Investment 2020 has additional provisions on the forms of and subjects entitled to investment incentives.
In terms of investment incentives forms, the Law on Investment 2020 has more details about the Law applicable to incentives, for example, the Law on corporate income tax, the Law on import and export tax. On top of that, there are an additional forms of investment incentives, which are fast depreciation or increasing deductible expenses when calculating taxable income.
Regarding the beneficiaries of investment incentives, the Law on Investment 2020 is clearer and more specific. Therefore, investment incentive policies are more effective when appropriate and worthy beneficiaries are identified. The specific changes of the Law on Investment 2020 in the beneficiaries of investment incentives are:
· Foreign investors will enjoy incentives if their minimum total revenue within 03 years since the first year of revenue reaches 10,000 billion VND per year, or investments projects with capital of 6,000 billion VND or more employ over 3,000 employees, and disburse at least 6,000 billion VND within 3 years from the date of being granted Investment Registration Certificate or the date when investment policy is approved.
· Subjects entitled to investment incentives:
+ Social housing construction investment projects;
+ Investment projects in rural areas employing 500 workers or more;
+ Investment projects employing disabled workers according to the provisions of Law on persons with disabilities (Point d, Clause 2, Article 15 of the Law on Investment 2020).
+ Projects involving technologies which are on the list of technologies encouraged for transfer under the Law on Technology transfer;
+ Technology incubators and science and technology business incubators in accordance with the Law on High technologies, and Law on science and technology;
+ Enterprises manufacturing and supplying technologies, equipment, products and services to meet the requirements of environmental protection in accordance with the Law on environmental protection (Point dd, Clause 2, Article 15 of the Annual Investment Law 2020).
+ Innovative start-ups, innovation centers, research and development centers (Point e, Clause 2, Article 15 of the 2020 Investment Law).
+ Investment and trade in the product distribution chain of small and medium enterprises; investment in technical facilities to support small and medium enterprises; small and medium-sized enterprise incubators; investment in and operating co-working space to support small and medium-sized innovative startups in accordance with the Law on support for small and medium-sized enterprises (Point g, Clause 2, Article 15 of the Law on Investment 2020).
In addition, the Law on Investment 2020 also stipulates that investment projects to build commercial houses as prescribed by Law on housing are not subject to investment incentives.
At the same time, the Law on Investment 2020 also sets out the principles and conditions for investors to enjoy specific investment incentives specified in Clauses 6 and 7, Article 15:
· Investment incentives are applied for a limited time and on the basis of the project implementation results. Investors must satisfy conditions for incentives as prescribed by law during the period of investment incentives.
· Investment projects that satisfy the conditions for various investment incentives, including those specified in Article 20 of the Law on Investment 2020, are entitled to the highest investment incentives.
It can be seen that the amendment of the Law on Investment in terms of beneficiaries of investment incentives focuses on high-tech enterprises, innovative start-up projects, research and development centers, production of new materials, new and clean energy, information technology products, software, digital content and related fields.
Written by Alice Hoang Thao - VietnamCredit
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